The Justice Department has begun an investigation of chicken producers to see if they have shared information about employment practices to hold down the wages of plant workers throughout the highly concentrated poultry processing industry. The issue at the heart of the civil investigation is whether these practices amount to anticompetitive behavior in violation of federal law, including the Federal Trade Commission Act, the Sherman Act, and the Clayton Act.
Line workers in chicken producer plants are among the lowest paid and most disadvantaged industrial workers. The work is dirty and dangerous, with a higher rate of injury than coal mining or logging. It is often the first job for recent immigrants to the U.S., whose English is limited or non-existent. The potential for abuse is huge.
The injustice of potential industry-wide collusion to hold down their wages shocks the conscience. But the possibility that illegal anticompetitive employment agreements exist also poses a risk for executive-level managers and human resource professionals who know the facts but may be unaware of the legal guidelines.
Our Texas Employment Law Practice Knows the Red Flags of Unfair Employment Agreements
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Chicken Producers in a Concentrated Industry Already on the Antitrust Radar
Americans have a huge appetite for chicken. In 2022, the average American is expected to eat more than 98 pounds of chicken, and chicken producers are on track to slaughter eight billion birds. Nonetheless, the huge industry is dominated by four producers: Tyson Foods, Pilgrim’s Pride, Sanderson Farms, and Perdue Farms. These are the producers reportedly under DOJ scrutiny.
In September 2021, the Biden administration announced plans to crack down on alleged meat price fixing among large meat processors. Meat and poultry makers claimed that pandemic-related labor shortages limited how much they could process and caused meat shortages and higher prices. The 2021 proposed acquisition of Sanderson Farms by Cargill and Continental Grain was delayed by a DOJ antitrust investigation and criticized by lawmakers who cited significant antitrust concerns. This is the backdrop for the latest probe concerning wage and hiring collusion.
Anticompetition Law in a Nutshell
The Federal Trade Commission Act permits the FTC to prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce. The Clayton Antitrust Act, intended to strengthen earlier antitrust legislation, prohibits anticompetitive mergers, predatory and discriminatory pricing, and other forms of unethical corporate behavior. Finally, and perhaps most importantly, the Sherman Act, prohibits “every contract, combination, or conspiracy in restraint of trade.”
Wage fixing and no-poaching agreements are likely the areas on which the DOJ is focused. Under the combined authority of all three statutes, the FTC and the DOJ have focused on two types of ant-competitive agreements that, without any pro-competitive justification, give rise to a violation of the antitrust laws. These are:
- Wage-Fixing Agreements, which are agreements pertaining to employee salary or other terms of compensation; and
- No-Poaching Agreements, which are agreements to refuse to solicit or hire another company’s employees.
Red Flags Among Chicken Producers
Workers in chicken processing plants are unlikely to have access to information about industry-wide agreements concerning hiring or wages. But they may have evidence that such arrangements exist if wage rates are identical among employers or if competing companies simply refuse to hire based on a current or prior employer. It is often impossible for them to raise these concerns.
Others are in a better position to raise questions, however. For executive-level managers and human resource professionals who want guidance about what is legal and what to avoid, federal antitrust agencies have identified nine red flags:
- An agreement with another company about employee salary or other terms of compensation, either at a specific level or within a range;
- An agreement with another company to refuse to solicit or hire that other company’s employees;
- An agreement with another company about employee benefits;
- An agreement with another company on other terms of employment;
- A suggestion to competitors that they should not compete too aggressively for employees;
- Exchange of company-specific information about employee compensation or terms of employment with another company;
- Participation in a meeting, such as a trade association meeting, where the above topics are discussed;
- Discussion of the above topics with colleagues at other companies, including during social events or in other non-professional settings; or
- Receiving documents that contain another company’s internal data about employee compensation.
Even if an individual does not agree orally or in writing to limit employee compensation or recruiting, other circumstances – such as evidence of discussions and parallel behavior – may lead to an inference that the individual has agreed to do so. In addition, merely inviting a competitor to enter into an illegal agreement may be an antitrust violation, even if the invitation does not result in an agreement to fix wages or otherwise limit competition.
Competition is Good in Every Market, Not Just Chicken Producers, According to the U. S. Federal Government
Encouraging a competitive labor market is clearly a priority for the FTC and DOJ under the Biden Administration. Accordingly, employers may want to review their hiring-related agreements with competitors in the same labor market for compliance with the antitrust laws. Their goal should be to ensure that they have established antitrust policies and procedures to educate hiring managers about antirust considerations in the employment law context.
Although the current DOJ investigation of poultry processors is civil, it is important to realize that the DOJ may proceed criminally against wage-fixing or no-poaching agreements. Individuals who become aware of suspect arrangements are encouraged to report them to the DOJ or the FTC. Consulting with legal counsel would be a very sound first step at this point.
Our Employment Law Attorneys Can Help You Understand the Law Concerning Anticompetitive and Antitrust Employment Law Practices
Our experienced employment law attorneys understand the nuances of DOJ and FTC enforcement actions concerning wage-fixing and no-poaching agreements. Contact us for guidance about how to avoid prohibited information-sharing or if you believe that your company’s practices do not comport with the law. Reach out to Kilgore & Kilgore for a free review of the facts of your case. Click here to get the conversation started contact Kilgore & Kilgore.